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As Chinese emissions overtake the US can business solve the problem?

It has been predicted for years that CO2 emissions from China would overtake those from the US sometime prior to 2010 and possibly even this year, but according to a new study released yesterday by the Netherlands Environmental Assessment Agency it has already happened.

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The report analysed CO2 emissions from fossil fuel burning and cement production and found that China emitted 6,200m tonnes last year – eight percent more than the US. The result marks a staggering reversal from 2005 when China was still 2 percent behind the US in terms of CO2 emissions.

It is easy to understand why environmentalists get twitchy about China.

The scale of the problem is simply terrifying. While China is now a larger polluter than the US in total it is still way down the global league table in terms of CO2 emissions per capita, with emissions per person about a quarter that of the US. This means that with the Chinese government committed to raising the quality of life for all its population (and why shouldn't it be) the the massive growth in emissions we've seen over the last decade will only accelerate. It is easy to believe the UK Foreign Office's claims today that China is now building two new coal-fired power stations a week.

It is hard not to despair at figures like these. They give succour to all those who argue that action to curb emissions in the West are all but pointless without similar action in China and give businesses and governments some form of economic justification for delaying low carbon investments.

The knee jerk reaction for business leaders is to simply wash their hands of the problem and argue that it is now up to the international community to engineer some form of global regulatory framework that includes China.

Yet despite all this pessimism there is both a ray of hope and a series of actions businesses can take to help resolve the China predicament.

The first is that just as there is massive capacity for an increase in Chinese emissions there is also massive capacity for improvements in the Chinese economy's carbon intensity – the measure of how much GDP is generated for each tonne of carbon.

Back of the envelope calculations based on the Dutch report and figures from the CIA World Factbook show that the US generates over five times as much GDP from each tonne of CO2 emissions compared to China. This suggests that China can deliver economic growth while keeping emissions static if it can only emulate US productivity and enhance the efficiencies of its various processes.

It is this goal that was at the heart of the Chinese government's recently released climate change strategy where it set itself the target of reducing energy consumption per unit of GDP by 20 percent by 2010.

This will be achieved in part through an increased investment in renewable energy, but many western economies boast a much lower carbon intensity than China without a significant contribution from the renewable sector suggesting that China can improve its carbon intensity through the deployment of conventional technologies and processes. Such an economic transformation will provide numerous opportunities to Western firms that have already developed the energy efficient processes and business models China is now keen to emulate.

The second point, and the one that gives green businesses the greatest hope, is that regardless of how hard US and European politicians try to convince us otherwise, China does not exist in a vacuum.

China is one of the most export dependent economies in the world. Its current account surplus stood at $250bn last year with over 20 percent of exports going to the US and a further 10 percent going to Japan. This means that western importers have huge influence over the Chinese economy. In many ways they have more influence over China than our politicians and as such it is they that really have the power to instigate green business models.

Western firms that are serious about climate change need to realise that tackling emissions in their own back yard is not sufficient and that effort also needs to go into addressing the impact of their supply chains, many of which originate in countries with soaring carbon emissions such as China and India. After all the climate has no concern over which side of a national boundary CO2 emissions come from.

A firm committed to reducing emissions right across its operations can even make a business case for undertaking low carbon initiatives in these developing countries first, on the grounds that the low carbon intensity evident in their inefficient processes, the relatively low cost of labour and real estate, and the less stringent planning laws should make it easier and cheaper to implement low carbon investments there than in it is here.

It is concerning to hear that China has finally taken the US's title as the world's worst polluter and equally worrying to think that India could soon knock the US into third place, but it is lazy logic to suggest that we can't do anything about it.